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With these insurers, I generally back out any cap gains (realized and unrealized) and perhaps some non-cash items like stock comp expense, and any amort/depreciation to arrive at a core operating earnings number - pretax.
I understand what you are driving at with regards to spikes in insurance claims in any one quarter, and I don't assume any strong knowledge of the industry and sector to know whether its appropriate to normalize this. Cash flows from operations ytd and y/y were strong because of an increase in unearned premiums and "other" liabilities. Both of those items negatively impacted the earnings statement.
How are you defining core operating income for UIHC?
UIHC operating income was also down slightly y/y (-5%) in Q1. That, coupled with an increase in FD shares of 55% made the earnings report look ugly.
I guess they'll have some tough comps until the anniversary of the stock offering....unless they substantially improve operating margins.
If you fully participate in the rights offering as a current shareholder, you will not see your share of the company diluted. I don't disagree with that point. However, net income won't change because of this maneuver, so in effect you are diluting eps in the future because you now have 20MM more shares issued. Current share count is around 40MM. All things being equal, with a share count rising to 60MM, it will be tough to grow eps y/y AND the yield drops as well.
I'm not sure I can make it any clearer than that.
I guess there are a lot of shareholders who think its better to buy shares in the 4s just so they can participate in a rights offering to buy one additional share at below market value.
Once this "deal" is completed and the new shares are issued, watch out below.
One other point to make about the cash being raised to pay down the debt to Vong/Lam....they weren't charging the company any interest for it!
Why would you pay off that debt first if you didn't need to?
The cons of this deal seem to outweigh the positives in the intermediate future. Come back in 6-12 mos and once forward eps growth is in view again (hopefully) it becomes a more enticing stock.
Not exactly. Loan drops to zero, which increases SE....true. However, the share count goes way up too....so book value on a per share basis doesn't go up as much. Of course, the way these guys make new acquisitions, it actually hurts book value in the short run because of the cash paid up front and additional liabilities incurred.
Not saying its all bad, it just depends on what you think will provide the catalyst(s) for future buying demand for the stock.
For me, its primarily the forward fd eps growth. This plan will hurt that over the next 6-12 mos, all things being equal.
Doesn't the debt have to be fully repaid in order for AERL to get a dual listing on HK? Those officers are getting 60MM and putting a big chunk of it back in....but certainly not all.
AERL has to find a way to raise the entire amount to satisfy HK.
Once all the dust settles, you have a company that will have increased its share count by 50%, which will be quite dilutive in the short run. It doesn't matter whether the primary officers are paying a premium for those shares, they will still be issued. The structure of the offer is designed to get current shareholders to infuse more cash into the company. The enticement is the opportunity to pay far below market ($3/share) which is approx 2x forward PE.
Who is everyone going to sell those $3 shares to?
I don't begrudge Vong and Lam getting back the money they loaned to the company, but I don't think this is a very shareholder friendly deal either. In the long run (next 1-2 years) it may be just a bump in the road, but I'm not really interested in owning the shares unless they trade back down below 3.50.
This represents 50% dilution to fd eps, barring any new acquisitions and/or company buybacks. The money raised in the rights offering will go to Vong and Lam to pay off the 60MM in debt owed to them. (The same debt that had a conversion price of around 20/sh previously.)
Also means the yield will drop too.
After this deal, I expect there will be plenty of shares for sale in the 4-4.50 range......
We'll have to see what the forward numbers come down to. They slightly missed the Bain/Stern Agee estimate for Q1, and I think he had them at around 1.42 for FY13.
Hmmm....this PR is trying to give existing shareholders some comfort that their interests won't be diluted unless they participate fully and exercise their right to purchase shares at what will be a discount to market.
Two big problems:
a) The issuance of new shares will represent a substantial increase in the share count, and so earnings, yield, etc will likely go down vs the y/y comps, esp in the 2nd half. I predict the share price will fall accordingly and stay down until we get to the end of the dilution and earnings growth can resume (assuming a resumption of better business conditions).
b) With all of those newly issued below market shares hitting the market soon, there will be a rush to sell some or all quickly to avoid the downdraft. Any backstopping from the large shareholders won't really help....and the earnings growth that had been forecast for later in the 2nd half of this year now won't materialize, even with another acquisition.
Seems like management didn't really understand or communicate that there was going to be substantial dilution with any HK offering.
Here is the transcript of the last earnings CC. One of the analysts asked a question about the mechanics of the HK listing:
Two questions, where are you at with account buyback and second question what if any dilution or would be from the Dual Listing. And I think because we’re getting really close to that point we are within what quarter to of that, I would like a comprehensive answer on the call, with regards to the mechanics of that and any dilution and so I think that would be important. Thanks.
Edward Chen - Assistant to the Chairman
For the Hong Kong listing we’re doing I mean like through by introduction, so when I’m going to raise an equity, I mean from the Hong Kong listing.
Chris B. White - Greenstone Capital Management Partners LP
And could you just explain how that works, the mechanics – it would play just a little bit more in depth if you could?
Edward Chen - Assistant to the Chairman
Okay, so, the thing is I’d say like this – whoever want to trade their shares in Hong Kong conjuncts with the shares at Hong Kong Stock Exchange and we will, I mean initially in the first two months, we will have investment bank working out like a good arbitrage. So the price difference will not exceed 10%.
Chris B. White - Greenstone Capital Management Partners LP
Right, but and I don’t want to bow down the call, but if it’s product introduction my understanding is that the investment bank will take some shares from some holders let’s just say, it’s the insiders and then they will use this years (inaudible).
Lam Man Pou - Chairman
Yeah they will play with the shares and then with the arbitrage.
Chris B. White - Greenstone Capital Management Partners LP
Right, and then there will be an underlying agreement between who they borrow their shares from and then that will go in and buy their shares on the U.S. market and then delivering them to whoever wait them in the first place. Is that correct?
Edward Chen - Assistant to the Chairman
Yes, I said it’s one of the alternative, yes.
Chris B. White - Greenstone Capital Management Partners LP
Okay, right and so there is an underlying agreement to deliver those shares back from the investment bank to the original lender of the shares.
Lam Man Pou - Chairman
Yes, and so the risk is on the investment bank. There is no dilution to AERL and at some point those shares were brought by investment bank will be delivered back to the original holder is that correct?
James R. Preissler - Director of Asia Entertainment
Correct, we’re not going to raise any equity from the listing in Hong Kong, it’s through that was like by introduction.
Chris B. White - Greenstone Capital Management Partners LP
Right okay, I think I understand how it works, I just feel like we’re really close and perhaps more of a defined how we work, for everyone because I feel like it’s perhaps a bit of an overhang right now, but congratulations on everything else and I do appreciate how you listen to us about you had a best use of free cash flow and grow your business and continue to buy back, so I will let someone else get on the call.
------------------------------------
How truthful was that answer? Technically, its accurate in that they did not raise equity on the HK. However, they will be raising nearly $63MM in order to satisfy the listing requirements/demands......so this is really an argument about semantics. Either way, there will be substantial dilution in the short run and fd eps will be lower than what it would have been absent the HK listing.
Perhaps the 4MM share buyback will help staunch some of the selling impact, but at current prices, the company would have to issue rights to allow for the exercise of approx 15MM new shares to pay off Lam and Vong.
This is what drives you crazy about investment banking "analysts"....Goldman decides to downgrade AVG today, and here is the reasoning:
Goldman Sachs downgraded AVG Technologies (NYSE: AVG) from Buy to Neutral with a price target of $18.50 (from $18.00). The downgrade comes as shares approach the firm's price target. Analyst Greg Dunham sees more opportunity in shares of Palo Alto Networks, Inc. (NYSE: PANW), rated Conviction Buy.
"We view this downgrade as a question of resource allocation rather than a criticism of AVG, as other names in the security space provide more upside with higher growth opportunities and less uncertainty," said Dunham.
For an analyst ratings summary and ratings history on AVG Technologies (NYSE: AVG) click here. For more ratings news on AVG Technologies click here.
Shares of AVG Technologies closed at $17.48 yesterday, with a 52 week range of $9.42-$18.13.
----------------------
Instead they recommend PANW, which is trading at > 100x FY14 estimates and a recent IPO. If you guessed that Goldman was one of the bigger underwriters of that deal, you get a gold star!
I had trimmed back about 20% of my position in the run-up into earnings....but I think this will see the 16-17 range shortly. Holding out for that ST target before trimming again.
Would be a buyer again if it dips back below 13.
I think you are seeing some short covering this AM, so I'm not sure how much to trust this spike up. I wouldn't chase it either.
Another strong quarter for PERI. Stock is up sharply on the earnings news out this AM. Should exceed their targets for FY13 easily....
Perion Reports Record First Quarter Revenue, EBITDA, EPS and Cash Flow
Strengthens business with the signing of three search partnerships
Press Release: Perion Network Ltd. – 57 minutes ago
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PERI 12.60
TEL AVIV & SEATTLE--(BUSINESS WIRE)--
Perion Network Ltd. (PERI), today announced record financial results for the first quarter ended March 31, 2013.
Q1 2013 non-GAAP Year-Over-Year Financial Highlights:
Quarterly revenues more than doubled, reaching $27.6 million;
Adjusted EBITDA tripled, reaching $7.9 million, or 29% of revenues;
Net income increased 166%, reaching $5.8 million, or 21% of revenues;
Earnings Per Share doubled, reaching $0.45; and
Cash flow from operations tripled, reaching $7.5 million.
Josef Mandelbaum, Perion’s CEO commented: “The first quarter of 2013 was an extraordinary start for Perion. We had record organic and total revenue growth, increased profitability, strong cash generation, enthusiastic acceptance of our new Incredimail for iPad product and the successful integration of SweetPacks. Perion is hitting on all cylinders, and delivering impressive results against each of its operational and financial metrics. We have good visibility for the rest of the year and are well on our way to achieving, and likely exceeding, our guidance of 80%-plus growth."
“We also saw great progress in further solidifying the foundation of our business to position ourselves for long term sustainable growth," Mr. Mandelbaum added. "Our search diversification strategy yielded excellent results as we signed two new non-exclusive search partnership agreements with Bing and Ask.com, as well as signing an additional two-year non-exclusive agreement with Google. In addition, our increased investment in mobile platforms and our strong pipeline of future accretive acquisitions, form the nucleus of our growth strategy for the future.”
Non-GAAP Financial Comparison for the First Quarter of 2013:
Revenue: Q1’13 revenues were a record $27.6 million, increasing 145%, compared to the first quarter of 2012. The accelerated growth was a result of positive trends in all of Perion’s revenue streams, particularly with search generated revenues increasing 266% year-over-year. The extensive growth in search generated revenues was primarily a result of the acquisition of SweetPacks in November of 2012, coupled with robust organic growth.
Gross Profits: Gross profit in the first quarter of 2013 was $26.4 million, increasing 151%, compared to $10.5 million in the first quarter of 2012. The gross profit margin increased to 96% this last quarter, compared to 93% in the first quarter of 2012. This was a result of the significant growth in search generated revenues, a revenue stream with virtually no direct costs.
Customer Acquisition Costs (“CAC”): In the first quarter of 2013, Perion increased its investment in CAC to a record $11.4 million, more than quadruple the $2.6 million invested in the first quarter of 2012. The increase in CAC was enabled by the Company's strengthened marketing team and enhanced back-end systems.
Adjusted EBITDA: In the first quarter of 2013, Adjusted EBITDA was $7.9 million, or 29% of sales, a 201% increase compared to the $2.6 million in the same quarter last year, despite the $8.8 million increase in CAC.
Net Income: In the first quarter of 2013, net income was $5.8 million, increasing 166%, from $2.2 million in the first quarter of 2012. The growth in net income caused earnings per share to more than double from $0.22 per share in the first quarter of 2012, to $0.45 per share in the first quarter of 2013.
Cash Flow from Operations: Based on U.S. GAAP, in the first quarter of 2013 cash flow from operations was $7.5 million, tripling the $2.5 million in the first quarter of 2012.
2013 Financial Outlook:
Management today reaffirmed that it will achieve, and likely exceed, its 2013 Financial Outlook announced on January 8th:
Revenue of $110 million, representing overall growth of 80% year-over-year;
EBITDA of $26 million, representing an overall growth of 86% year-over-year;
Non-GAAP Net Income of $20 million, representing overall growth of 94% year-over-year; and
Non-GAAP EPS of $1.61, representing overall growth of 63% year-over-year.
Conference Call
Perion will host a conference call to discuss the results today, May 13th at 10 a.m. EDT (5 p.m. Israel Time). To listen to the call please visit the Investor Relations section of Perion’s website at www.perion.com/events-presentations. Click on the link provided for the webcast, or dial 1-866-744-5399. Callers from Israel may access the call by dialing (03) 918-0685. The webcast will be archived on the company’s website for seven days.
About Perion Network Ltd.
Perion Network, Ltd. (PERI) is a global consumer internet company that develops applications to make the online experience of its users simple, safe and enjoyable. Perion’s three main consumer brands are: Incredimail, Smilebox and SweetIM. Incredimail is a unified messaging application enabling consumers to manage multiple email accounts and Facebook messages in one place with an easy-to-use interface and extensive personalization features, and is available in over 100 countries in 8 languages; Smilebox is a leading photo sharing and social expression product and service that quickly turn life's moments into digital keepsakes for sharing and connecting with friends and family, in a fun and personal way. SweetIM is an instant messaging application that enables consumers to personalize their everyday communications with free, fun and easy to use content. Perion products have had over 300 million downloads to date with more than 50 million monthly unique visitors across all of its brands. Most of Perion’s applications are monetized through a freemium model. Free versions of our applications are monetized primarily through our toolbar which generates search revenue and display advertising revenue, generated through impressions. A more advanced feature rich version of many of our products is available with a premium upgrade. Perion also offers and develops a range of products for mobile phones and tablets to answer its users increasing mobile demands. For more information on Perion please visit http://www.perion.com.
Non-GAAP measures
Non-GAAP financial measures consist of GAAP financial measures adjusted to exclude: Valuation adjustment on acquired deferred product revenues, amortization of acquired intangible assets, share-based compensation expenses, acquisition related expenses, accretion of payment obligation related to acquisitions and taxes on amortization of acquitted intangible assets. The purpose of such adjustments is to give an indication of our performance exclusive of non-cash charges and other items that are considered by management to be outside of our core operating results. Our non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Business combination accounting rules requires us to recognize a legal performance obligation related to a revenue arrangement of an acquired entity. The amount assigned to that liability should be based on its fair value at the date of acquisition. The non-GAAP adjustment is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business. We believe these non-GAAP financial measures provide consistent and comparable measures to help investors understand our current and future operating cash flow performance. These non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. Reconciliation between results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statements of Income.
Forward Looking Statements
This press release contains historical information and forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 with respect to the business, financial condition and results of operations of the Company. The words “will”, “believe,” “expect,” “intend,” “plan,” “should” and similar expressions are intended to identify forward-looking statements. Such statements reflect the current views, assumptions and expectations of the Company with respect to future events and are subject to risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, or financial information, including, among others, potential litigation associated with the transaction, risks that the Company's acquisition activities may disrupt current plans and operations and pose difficulties in employee retention, risks entailed in integrating acquired businesses, changes in the markets in which the Company operates and in general economic and business conditions, loss of key customers and unpredictable sales cycles, competitive pressures, market acceptance of new products, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, whether referenced or not referenced in this press release. Various other risks and uncertainties may affect the Company and its results of operations, as described in reports filed by the Company with the Securities and Exchange Commission from time to time, including its annual report on Form 20-F for the year ended December 31, 2012. The Company does not assume any obligation to update these forward-looking statements.
Source: Perion Network Ltd.
PERION NETWORK LTD.
NON-GAAP SUMMARY FINANCIAL METRICS
U.S. dollars (except per share data) in thousands, unaudited
Quarter ended
March 31,
2013 2012
Revenues:
Search $ 20,309 $ 5,552
Product and Other 7,269 5,704
Total revenues $ 27,578 $ 11,256
Gross Profit $ 26,352 $ 10,492
EBITDA $ 7,901 $ 2,621
Operating Income $ 7,622 $ 2,398
Net Income $ 5,783 $ 2,176
Diluted EPS $ 0.45 $ 0.22
PERION NETWORK LTD.
GAAP INTERIM FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars and number of shares in thousands (except per share data), (unaudited)
Quarter ended March 31,
2013 2012
Revenues:
Search $ 20,309 $ 5,552
Product and Other 7,269 5,107
Total revenues 27,578 10,659
Cost of revenues 3,088 1,023
Gross profit 24,490 9,636
Operating expenses:
Research and development, net 3,372 2,683
Selling and marketing 2,784 1,681
Customer acquisition costs 11,365 2,613
General and administrative 2,218 1,991
Total operating expenses 19,739 8,968
Operating income 4,751 668
Financial (expense) income, net (454 ) 52
Income before taxes on income 4,297 720
Taxes on income 1,409 350
Net income $ 2,888 $ 370
Basic earnings per share $ 0.24 $ 0.04
Diluted earnings per share $ 0.22 $ 0.04
Basic weighted number of shares 12,087 9,917
Diluted weighted number of shares 12,838 10,007
PERION NETWORK LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
U.S. dollars and number of shares in thousands (except per share data), unaudited
Quarter ended
March 31,
2013 2012
GAAP revenues $ 27,578 $ 10,659
Valuation adjustment on acquired deferred product revenues - 597
Non-GAAP revenues $ 27,578 $ 11,256
GAAP gross profit $ 24,490 $ 9,636
Valuation adjustment on acquired deferred product revenues - 597
Amortization of acquired intangible assets 1,858 250
Share based compensation 4 9
Non-GAAP gross profit $ 26,352 $ 10,492
GAAP operating expenses $ 19,739 $ 8,968
Acquisition related expenses - 313
Share based compensation 546 351
Amortization of acquired intangible assets 463 210
Non-GAAP operating expenses $ 18,730 $ 8,094
GAAP operating income $ 4,751 $ 668
Valuation adjustment on acquired deferred product revenues - 597
Acquisition related expenses - 313
Share based compensation 550 360
Amortization of acquired intangible assets 2,321 460
Operating income adjustments 2,870 1,730
Non-GAAP operating income $ 7,622 $ 2,398
GAAP Net income $ 2,888 $ 370
Operating income adjustments 2,871 1,730
Accretion of payment obligation related to acquisitions 267 76
Taxes on amortization of acquitted intangible assets (243 ) -
Non-GAAP net income $ 5,783 $ 2,176
GAAP diluted earnings per share $ 0.22 $ 0.04
Non-GAAP diluted earnings per share $ 0.45 $ 0.22
Shares used in computing US GAAP and non-GAAP diluted earnings per share 12,838 10,007
Non-GAAP net income $ 5,783 $ 2,176
Income tax expense 1,409 350
Taxes on amortization of acquitted intangible assets 243 -
Interest expense (income), net 187 (128 )
Depreciation and amortization 279 223
Non-GAAP EBITDA $ 7,901 $ 2,621
PERION NETWORK LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
March 31, December 31,
2013 2012
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 27,647 $ 21,762
Trade receivables 7,595 10,246
Restricted cash 10,260 10,260
Other receivables and prepaid expenses 3,269 5,424
Total current assets 48,771 47,692
LONG-TERM ASSETS:
Property and equipment, net 1,529 1,522
Goodwill and other intangible assets, net 71,193 72,730
Other assets 1,287 1,215
Total long-term assets 74,009 75,467
Total assets $ 122,780 $ 123,159
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,300 $ 2,300
Trade payables 5,756 9,560
Deferred revenues 5,462 5,132
Payment obligation related to acquisitions 20,361 20,317
Accrued expenses and other liabilities 14,935 14,679
Total current liabilities 48,814 51,988
LONG-TERM LIABILITIES:
Long-term debt 5,975 6,550
Contingent purchase consideration 6,301 6,078
Other long-term liabilities 3,528 3,833
Total long-term liabilities 15,804 16,461
SHAREHOLDERS' EQUITY 58,162 54,710
Total liabilities and shareholders' equity $ 122,780 $ 123,159
PERION NETWORK LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands, (unaudited)
Quarter ended March 31,
2013 2012
Cash flows from operating activities:
Net income $ 2,888 $ 370
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,600 683
Stock based compensation expense 550 360
Accretion of payment obligation related to acquisitions 267 76
Deferred taxes, net (270 ) (30 )
Accrued severance pay, net 49 36
Net change in working capital 1,432 985
Net cash provided by operating activities 7,516 2,480
Cash flows from investing activities:
Purchase of property and equipment (202 ) (110 )
Capitalization of software development and content costs (854 ) (106 )
Net cash used in investing activities (1,056 ) (216 )
Cash flows from financing activities:
Payment of long-term loan (575 ) -
Net cash used in financing activities
(575 ) -
Increase in cash and cash equivalents 5,885 2,264
Cash and cash equivalents at beginning of year 21,762 11,260
Cash and cash equivalents at end of year $ 27,647 $ 13,524
Contact:
Perion Investor Relations
Deborah Margalit, +972-3-7696100
investors@perion.com
or
Hayden/MS-IR LLC
Brett Maas, 646-536-7331
Brett@haydenir.com
or
Miri Segal-Scharia, 917-607-8654
msegal@ms-ir.com
Just did the math on UVE's TTM adjusted fd eps as of March 31, 2013. Using a 40% tax rate and backing out all investment gains/losses for the past 12 months, it appears that UVE earned 1.01 on an operating basis.
They also repurchased 2MM shares from the ex-CEO which wasn't fully reflected yet in the fds count.
Annual dividend of 0.32 also adds to the solid value here. 4.5% yield at current SP.
However, Hurricane season is approaching!! That tempers the enthusiasm a bit.
R59, agreed on UVE and their investment policy of the past. Do you have an adjusted TTM eps for UVE's core earnings?
Correction on PERI and Yahoo announcing a new relationship last year....that was AVG. Sorry about that.
Either way, the news that PERI is adding new search partners and diversifying their rev stream is a positive. The stock is trading at 52 week and all-time highs and the IBD crowd is beginning to notice the stock and the sector. Not beyond the realm of possibility to hit the 16s before this latest run loses steam.
PERI out with some good news this AM. They have signed a deal with ask.com, further diversifying their revenue stream. If I recall, the last time they announced a new partner (Yahoo) the stock jumped about 20%. Of course, the stock has already made a monster move from its lows in the 8s, so the response today may be a bit more muted. Still undervalued on a projected "cash" eps basis. The company has guided for 1.61 in FY13 using this non-GAAP measure.
-----------------------------
Perion Announces Three-Year Search Partnership with Ask.com
Non-Exclusive Agreement Further Diversifies and Optimizes Perion's Search Business
Tel Aviv and Seattle, May 8, 2013 - Perion Network Ltd. (NASDAQ: PERI) announced today it has entered into a three year non-exclusive search and distribution relationship with Ask.com, a long-time recognized Q&A brand and leader in the search industry and an operating business of IAC (NASDAQ: IACI).
By partnering with Ask.com, Perion will be able to offer its users Ask’s unique, customized search experience and applications. Ask provides general search services as well as direct answers to natural language questions to more than 100 million global users. It’s also a demonstrated leader in delivering customized search solutions to leading software companies worldwide.
Commenting on the agreement, Josef Mandelbaum, Perion's CEO, said, "We are very excited to add Ask.com as a search partner. We believe Ask.com’s unique approach to helping consumers find what they are looking for is a great match for our audience. While we can’t disclose the terms of the agreement due to confidentiality, I can say that the agreement should be very beneficial economically to Perion. It is non-exclusive, and is for three years, providing us long term stability for our business. With three different search providers, Perion is now in the best position in its history for optimizing its search offerings, benefitting both the Company and our growing base of users."
"We are very happy to begin this new strategic relationship with Perion," said Andrew Moers, President of the Ask Partner Network. “This new alliance is a great opportunity for us to broaden Ask’s reach and provide our customized solutions to Perion’s millions of users. We look forward to working with Perion to deliver great products to their customers."
About Perion Network Ltd.
Perion Network, Ltd. (NASDAQ: PERI) is a global consumer internet company that develops applications to make the online experience of its users simple, safe and enjoyable. Perion’s three main consumer brands are: Incredimail, Smilebox and SweetIM. Incredimail is a unified messaging application enabling consumers to manage multiple email accounts and Facebook messages in one place with an easy-to-use interface and extensive personalization features, and is available in over 100 countries in 8 languages; Smilebox is a leading photo sharing and social expression product and service that quickly turn life's moments into digital keepsakes for sharing and connecting with friends and family, in a fun and personal way. SweetIM is an instant messaging application that enables consumers to personalize their everyday communications with free, fun and easy to use content. Perion products have had over 300 million downloads to date with more than 50 million monthly visitors across all of its brands. Most of Perion’s applications are monetized through a freemium model. Free versions of our applications are monetized primarily through our toolbar which generates search revenue and display advertising revenue, generated through impressions. A more advanced feature-rich version of many of our products is available with a premium upgrade. Perion also offers and develops a range of products for mobile phones and tablets to answer its users increasing mobile demands. For more information on Perion please visit www.perion.com
Cliff, I like SIMO too. This is definitely a 2nd half and FY14 play so guidance will be crucial. Not expecting a great result from either Q1 or Q2. Nice to collect a decent dividend while waiting for the turnaround.
I like this author's reasoning on the future catalysts....I also own NTE as well, another of his favorites.
PERI signs a contract renewal with Google for the next 2 years. Says that terms are better than the previous one....company is good comp to AVG.
Perion Announces Two-Year Renewal with Google
Press Release: Perion Network Ltd. – 3 minutes 58 seconds ago
TEL AVIV, Israel & SEATTLE--(BUSINESS WIRE)--
Perion Network Ltd. (PERI), today announced it has signed a two-year, non-exclusive, renewal with Google, extending the Company's relationship with the search provider, effective May 1, 2013.
Mr. Josef Mandelbaum, Perion’s CEO, said, “This is an important milestone for our long term growth strategy and we are very pleased to extend our strategic relationship with Google, now entering its eighth year. While the terms of the new contract are confidential, we can say that the business terms are slightly better than those achieved under the previous contract. In addition, I am happy to report that this renewal signifies our full support of, and commitment to comply with, Google's updated downloadable software policies."
Wade, AVG is an international company with subsidiaries all over the world. Many of those subs are in countries with tax rates far lower than the US. The 14% tax rate is a blended rate of all those different jurisdictions. It is consistent with what was reported last year.
If this were a company taking advantage of an off balance sheet NOL that was finite, then I would agree with you that its a concern.
That is clearly not the case here.
I'm more impressed by their cash flows and the speed at which they are paying off the debt taken on to pay off their PE holders.
The short case here is built entirely on their operating model collapsing because of changes in Google's toolbar policies. On the call they mentioned how they are transitioning over to mobile devices and building a lot of future business through protecting cellphones, tablets, etc. They have been impacted by the recent change, but not as badly as some feared. Some of the strength of the most recent quarter was due to a new product upgrade cycle that spurred a lot of customers to pay up for added security features. They still guided for a strong quarter ahead and they appear to be in the camp of underpromise, overdeliver.
Analysts have consistently been far too low:
http://finance.yahoo.com/q/ae?s=avg&ql=1
AVG posts blow-out numbers for Q1, beating analyst estimates by 0.20 for adj eps, and also beating on the top line (which has been rare these days). At high end of new guidance, the stock is still trading at <8x adjusted EPS. Stock is heavily shorted, which might limit any downside if any short covering comes in to play soon.
Quick summary:
Q1 FY13
Rev: +26% 104MM
Adj FD eps: +71% 0.58 (non-GAAP)
Raising full year guidance to:
Financial Outlook
Based on information available as of April 24, 2013, AVG is confirming or raising its outlook for fiscal 2013 as follows:
Revenue is expected to be in the range of $414 million to $422 million.
Net income is expected to be in the range of $73 million to $83 million; diluted EPS is expected to be in the range of $1.29 to $1.49.
Non-GAAP adjusted net income is expected to be in the range of $98 million to $108 million; non-GAAP diluted EPS is expected to be in the range of $1.74 to $1.94.
Operating cash flow is expected to be in the range of $144 million to $150 million; non-GAAP unlevered free cash flow is expected to be in the range of $134 million to $140 million.
Similarly, AVG is providing the following financial outlook for the second quarter of 2013:
Revenue is expected to be approximately $100 million.
Net income is expected to be in the range of $14 million to $17 million; diluted EPS is expected to be in the range of $0.25 to $0.32.
Non-GAAP adjusted net income is expected to be in the range of $22 million to $24 million; non-GAAP diluted EPS is expected to be in the range of $0.39 to $0.45.
AVG's expectation of non-GAAP adjusted net income for the second quarter of 2013 and fiscal year 2013 excludes share-based compensation expense and acquisition amortization and assumes a tax rate of 14 percent. For the purpose of calculating diluted EPS and non-GAAP diluted EPS, the Company assumes approximately 55 million weighted-average diluted ordinary shares outstanding for the second quarter and approximately 56 million weighted-average diluted ordinary shares outstanding for the full year.
AVG posts blow-out numbers for Q1, beating analyst estimates by 0.20 for adj eps, and also beating on the top line (which has been rare these days). At high end of new guidance, the stock is still trading at <8x adjusted EPS. Stock is heavily shorted, which might limit any downside if any short covering comes in to play soon.
Quick summary:
Q1 FY13
Rev: +26% 104MM
Adj FD eps: +71% 0.58 (non-GAAP)
Raising full year guidance to:
Financial Outlook
Based on information available as of April 24, 2013, AVG is confirming or raising its outlook for fiscal 2013 as follows:
Revenue is expected to be in the range of $414 million to $422 million.
Net income is expected to be in the range of $73 million to $83 million; diluted EPS is expected to be in the range of $1.29 to $1.49.
Non-GAAP adjusted net income is expected to be in the range of $98 million to $108 million; non-GAAP diluted EPS is expected to be in the range of $1.74 to $1.94.
Operating cash flow is expected to be in the range of $144 million to $150 million; non-GAAP unlevered free cash flow is expected to be in the range of $134 million to $140 million.
Similarly, AVG is providing the following financial outlook for the second quarter of 2013:
Revenue is expected to be approximately $100 million.
Net income is expected to be in the range of $14 million to $17 million; diluted EPS is expected to be in the range of $0.25 to $0.32.
Non-GAAP adjusted net income is expected to be in the range of $22 million to $24 million; non-GAAP diluted EPS is expected to be in the range of $0.39 to $0.45.
AVG's expectation of non-GAAP adjusted net income for the second quarter of 2013 and fiscal year 2013 excludes share-based compensation expense and acquisition amortization and assumes a tax rate of 14 percent. For the purpose of calculating diluted EPS and non-GAAP diluted EPS, the Company assumes approximately 55 million weighted-average diluted ordinary shares outstanding for the second quarter and approximately 56 million weighted-average diluted ordinary shares outstanding for the full year.
MEMS. I had just about given up on this deal ever getting done. Was worried that IDG would pull out given where the stock was trading and the time it was taking the SC to make a final decision.
Maybe there's hope for YONG and their SC finally making a decision announcement? YONG is still not trading due to not fully answering all of the SEC questions, one of which is about the take private deal status.
I understand your historical contempt for regulation and anti-government leanings....but that attempt at humor was in really poor taste.
Could be anything, but the most likely explanations for the gold sell-off are:
a) Several big players who were on margin are exiting/dumping.
b) Concerns over currency are not as great as concerns over future demand for gold (could also be interpreted as deflation fears)
I think if gold is part of one's asset diversification, its nearing a good time to buy....if for no other reason than the selling in the short run is bordering on wildly irrational.
Boy, you almost have to buy some GLD today based upon the sheer degree that its oversold.....just for a trade
http://www.bespokeinvest.com/thinkbig/2013/4/15/gold-trades-at-most-oversold-levels-on-record.html
Did a little bit of research into this guy (Okumus)....he has the same philosophy as a lot of us on this board and VMC. His trading philosophy is exactly like Wade, and he's even more aggressive when he decides he likes a stock. He's had a very good run for the most part, but did have one disastrous year in 2008-9 when he was forced to close down his fund for a while. Seems like he's back again. He was profiled in Schwager's "Market Wizards"
http://books.google.com/books?id=gRPQTISB-sUC&pg=PT177&lpg=PT177&dq=ahmet+okumus+market+wizard&source=bl&ots=dNWL2DHCOE&sig=0U_LMm3htnOf4Rx2w6HW-bdT0pY&hl=en&sa=X&ei=wKFLUc6GBYXi4AOq94CYAQ&ved=0CGsQ6AEwBw
Here was the last 13F filing for Okumus:
FORM 13F INFORMATION TABLE
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4 COLUMN 5 COLUMN 6 COLUMN 7 COLUMN 8
TITLE VALUE SHRS OR SH/ PUT/ INVESTMENT OTHER VOTING AUTHORITY
NAME OF ISSUER OF CLASS CUSIP (X$1000) PRN AMT PRN CALL DISCRETION MGRS SOLE SHARED NONE
-------------- -------- ----- -------- ------- --- ---- ---------- ---- ---- ------ ----
AVG TECHNOLOGIES N V SHS N07831105 51,379 3,245,669 SH SHARED-DEFINED 1 3,245,669
BLYTH INC COM NEW 09643P207 17,833 1,146,809 SH SHARED-DEFINED 1 1,146,809
CISCO SYS INC COM 17275R102 51,088 2,600,000 SH SHARED-DEFINED 1 2,600,000
EURONET WORLDWIDE INC COM 298736109 49,579 2,100,800 SH SHARED-DEFINED 1 2,100,800
HEWLETT PACKARD CO COM 428236103 4,288 300,916 SH SHARED-DEFINED 1 300,916
INTERNATIONAL GAME TECHNOLOG COM 459902102 12,736 898,809 SH SHARED-DEFINED 1 898,809
OWENS ILL INC COM NEW 690768403 300 14,100 SH SHARED-DEFINED 1 14,100
SMART TECHNOLOGIES INC CL A SUB VTG S 83172R108 1,412 893,697 SH SHARED-DEFINED 1 893,697
WESTERN UN CO COM 959802109 46,449 3,412,871 SH SHARED-DEFINED 1 3,412,871
AVG...hedge fund Wolf Opportunity/Okumus fund just out with a 13G amended filing showing that they increased their holdings of AVG by 2.2MM shares (+67% since Dec 31). They now hold just over 10% of the company (5.4MM shares).
They look like a concentrated fund of 235MM holding around 9 stocks, High risk, high reward.
Anyone familiar with them?
AVG out with a PR this AM re-affirming its guidance for FY13...and indicating that they expect to reach the high end for Q1. Stock is cheap, trading at 7.3x FY13 eps. Analysts have forecasted eps growth of 29% this year and 18% next.
PRESS RELEASE
March 21, 2013, 9:00 a.m. EDT
AVG Reaffirms Financial Outlook
AMSTERDAM, March 21, 2013 /PRNewswire via COMTEX/ -- AVG Technologies N.V. AVG +3.53% today announced that it expects its financial results for the first quarter of 2013 to be at or above the previously stated outlook in its earnings press release dated Thursday, February 21, 2013. The Company also reaffirmed its previously stated guidance for fiscal year 2013.
-----------------
Previous statement on guidance:
Financial Outlook
Based on information available as of February 21, 2013, AVG is providing the following financial outlook for fiscal year 2013:
•
Revenue is expected to be in the range of $408 million to $420 million.
•
Net income is expected to be in the range of $70 million to $75 million; diluted EPS is expected to be in the range of $1.24 to $1.33.
•
Non-GAAP adjusted net income is expected to be in the range of $95 million to $105 million; non-GAAP diluted EPS is expected to be in the range of $1.68 to $1.88.
•
Operating cash flow is expected to be in the range of $140 million to $150 million; non-GAAP unlevered free cash flow is expected to be in the range of $130 million to $140 million representing $2.30 to $2.50 of free cash flow per diluted ordinary share.
Similarly, AVG is providing the following financial outlook for the first quarter of 2013:
•
Revenue is expected to be in the range of $95 million to $98 million.
•
Net income is expected to be in the range of $11 million to $14 million; diluted EPS is expected to be in the range of $0.20 to $0.25.
•
Non-GAAP adjusted net income is expected to be in the range of $20 million to $22 million; non-GAAP diluted EPS is expected to be in the range of $0.35 to $0.40.
AVG out with a PR this AM re-affirming its guidance for FY13...and indicating that they expect to reach the high end for Q1. Stock is cheap, trading at 7.3x FY13 eps. Analysts have forecasted eps growth of 29% this year and 18% next.
PRESS RELEASE
March 21, 2013, 9:00 a.m. EDT
AVG Reaffirms Financial Outlook
AMSTERDAM, March 21, 2013 /PRNewswire via COMTEX/ -- AVG Technologies N.V. AVG +3.53% today announced that it expects its financial results for the first quarter of 2013 to be at or above the previously stated outlook in its earnings press release dated Thursday, February 21, 2013. The Company also reaffirmed its previously stated guidance for fiscal year 2013.
-----------------
Previous statement on guidance:
Financial Outlook
Based on information available as of February 21, 2013, AVG is providing the following financial outlook for fiscal year 2013:
•
Revenue is expected to be in the range of $408 million to $420 million.
•
Net income is expected to be in the range of $70 million to $75 million; diluted EPS is expected to be in the range of $1.24 to $1.33.
•
Non-GAAP adjusted net income is expected to be in the range of $95 million to $105 million; non-GAAP diluted EPS is expected to be in the range of $1.68 to $1.88.
•
Operating cash flow is expected to be in the range of $140 million to $150 million; non-GAAP unlevered free cash flow is expected to be in the range of $130 million to $140 million representing $2.30 to $2.50 of free cash flow per diluted ordinary share.
Similarly, AVG is providing the following financial outlook for the first quarter of 2013:
•
Revenue is expected to be in the range of $95 million to $98 million.
•
Net income is expected to be in the range of $11 million to $14 million; diluted EPS is expected to be in the range of $0.20 to $0.25.
•
Non-GAAP adjusted net income is expected to be in the range of $20 million to $22 million; non-GAAP diluted EPS is expected to be in the range of $0.35 to $0.40.
The YONG Special Committee should never have allowed this take private bid to linger as long as it has with NO public response. The Chinese reverse merger stocks are simply never going to be trusted and invested in for a long list of reasons. Better to take the offer and go private....they could have settled this weeks ago, lawsuits be damned. One could easily make the case that its a fair offer.
If the offer dries up because they dragged their feet, they'll get sued also. Either way, the SC probably gets sued but the best outcome for current shareholders would be to go private at 6.60.
YONG - trading halted "pending receipt of additional information requested by Nasdaq"
EDAC bought out this AM....congrats to any still holding!
http://finance.yahoo.com/news/edac-technologies-enters-merger-agreement-110000304.html
Still no word about the fate of the deal from the Special Committee created to study the worthiness of the offer. From memory, the terms of the financing expire at the end of this month.
Given that the stock is now trading nearly 25% below the offer price, the pressure to just take it has to be building. Its not like there is any future in the US Markets for reverse merger small cap Chinese stocks anyway....going private is best for everyone.
Hweb, I wonder why Red Oak has been such a consistent seller of RFIL recently? They held nearly 500k (7%) of the company as of last month.
Thanks for the call details...i'll have to listen in.
There are some aggressive shorts in this name. Reminds me (uncomfortably) of BTH...perhaps there is some other news to come that will make it clearer why the CEO decided to step down? The short interest in AVG has exploded over the last month, so there are a group of shorts who've read the research on this and decided to be very aggressive in shorting the name. Seeking Alpha has one short whose central thesis is that Google's changes in its policies enacted in February are going to hit freeware providers like AVG pretty hard. We'll see...management recently gave guidance for FY13 which was better than expected. They should have some credibility after blowing away the top end of their guidance for sales and eps last year....or NOT.
There will be an interesting report from PERI to look at soon with a CC scheduled for tomorrow AM. They are still negotiating with Google and have had guidance out for some time. Their stock has taken a big hit as well.
FYI on AVG: they are the top rated anti-virus freeware program at PC Magazine for 2013:
http://www.pcmag.com/article2/0,2817,2372364,00.asp
Sskillz, another stock that could be mentioned in the same category as AVG is PERI. Its in a different part of the online software app market (they sell/distribute email that looks a little jazzier than some of the standard gmail/yahoo/hotmail accounts).
Like AVG, they have also been caught up in the changes that Google has initiated for their search partners. Basically, Google doesn't want to be involved with companies that use deceptive practices like automatically installing search toolbars that push users into a search result with different paid advertisers from Google's list. The theory goes that if users don't use the toolbar search box that automatically installs (i.e. that is the default option) with their downloaded software, then the company gets less revenue than expected.
PERI has had guidance out there for a while, but that was before the changes to Google's policies. It will be interesting to see how this might impact them...but the stock has sold off and is very cheap at <6x adjusted forward eps. I believe that their management has been conservative in its past guidance, so even if Google's demands take a bite out of the projected revenues, they might still be made up in other ways. High risk/high return trade coming up, although I'd argue that the risk has been largely priced in once the stock traded down into the high 8s.
Wade, I think the more important questions are, is the company profitable and does it generate sufficient free cash flow to both meet its interest obligations and to continue paying off its debt?
In FY12, AVG had 100MM in free cash flow (from their 6K filed on 2/21/13). They also raised 64MM (netting 56MM) from the IPO back in early 2012. From those two sources, they paid off 134MM in debt and bought back nearly 5MM in shares and options.
Total debt at the end of December 2012 was 97.2MM, down from 225.4MM a year earlier.
The reason for the debt (and the reason for the negative book value) was that they paid a huge distribution to older shareholders and opted to do that via issuing debt. This distribution is explained here:
"Other than the initial start-up capital provided by our founder, we have not raised equity financing for our operations. Our net cash provided by operations has been sufficient to fund our growth to date. Our principal shareholders became investors in us principally through the purchase of shares from existing shareholders, either directly or indirectly through their purchase of shares from us and our concurrent dividend of the associated proceeds from such share issuances to our existing shareholders. As of September 30, 2011, our total shareholders’ deficit was $321.0 million, or $130.9 million as adjusted to give effect to conversion of our preferred shares upon the closing of this offering, with the shareholders’ deficit being principally a result of the aggregate of $557.5 million in dividends and distributions in excess of capital paid since January 1, 2008. We currently expect to retain future earnings, if any, to finance the growth and development of our business and to provide additional liquidity. See the section titled “Dividend Policy” in this prospectus."
Basically, they elected to pay out huge dividends to shareholders prior to the IPO. Some of that came out of cash flow, and some of it came by issuing debt.
They are no longer doing that, and using all free cash flow to pay off existing debt, make acquisitions, and buy back stock. If they didn't have good free cash flow, I'd say the debt and negative book value might be a problem...but I hope you will agree that this isn't the case.
I interpret this news to mean that the upcoming quarter or two are going to be really bad....the fact that they have doubled the buyback seems to telegraph the need to be ready for the sell-off to come.
MEMS reported its Q4 today. Uninspiring, as is the present company's outlook for Q1. However, they still have a $4/share buyout offer on the table. On the call, several investors questioned the company about this. Their answer was they could not comment but that the special committee was continuing to evaluate all possibilities in a "careful and deliberate" fashion.
Based upon the way the company is going, there is no reason not to accept the current offer on the table ASAP. I've got to believe that this issue should be settled one way or another in the next 1-2 mos. The company first disclosed the offer back on These buyout offers to take Chinese companies private can take much more time than expected. Management is not being sacked here, so its not a hostile takeover but seems to be a mutually beneficial agreement between a major backer/investor (IDG - Accel) and a small cap Chinese company that has no business trading publicly.
Eventually, I expect the Special committee to bow to the obvious and take the offer. Expect the baseless class action lawsuit, but that would be thrown out. The offer is over book value and the company has been losing money for the past two years. I added a few more shares today in the low 3s.
The danger is that the offer is withdrawn. I'd put it at <30% since of the huge amount of cash on the balance sheet here. It knocks the cost of acquisition way down.
I like ECPG's latest acquisition of Asset Acceptance (AACC)
http://finance.yahoo.com/news/encore-capital-group-announces-acquisition-122900623.html
Looks like they paid roughly 2x on a EV/EBITDA basis. Company indicated that continuing changes in regulation, along with a sellers market in distressed consumer credit receivables is what made this deal a win-win for both parties.
Should be a boost to earnings. Solid company, slow and steady. They plan on growing eps 15-20%/yr, and appear likely to do that for FY13 if this deal is completed. Analysts have started to boost their earnings expectations up, but they are still probably too low. (That is fine with me...I'd rather see the underpromise, overdeliver scenario play out)
Trades at 8.9x forward earnings. Outlook for sector is muted, but ECPG looks poised to do well even in a tough climate. An added benefit is if the economy does turn south, that will increase the market for them.